Cape Town – South Africa’s biggest unsecured loan provider, Capitec [JSE:CPI], revealed that it closed 2 000 bank accounts linked to Ponzi scheme MMM.
Speaking at the company's annual general meeting near Stellenbosch, Capitec CEO Gerrie Fourie told Fin24 in an exclusive interview on Friday that the drastic action was taken to protect the bank’s clients.
“The Ponzi scheme MMM had a big impact on us,” he said.
Fourie said that after becoming aware of the scheme, the bank monitored the MMM transactions, before freezing the accounts early in 2016. “We actually closed over 2 000 accounts that (were) involved in the scheme,” he said.
“Some of the clients became extremely violent and we had to bring in security guards.”
UPDATE ON MAY 31: Capitec Bank said the onus is on clients to prove their banking activity is not fraudulent, after which it will unlock closed accounts. READ: Capitec will unlock accounts if clients prove legit activity
Sarb must act faster - Fourie
Fourie criticised the South African Reserve Bank (Sarb) for not acting faster, after it informed them earlier this year about MMM. “It is important for the regulators, when we inform them of certain things, that they react much quicker, to make certain that people are protected,” he said.
“We reported MMM and it took four or five months before we got an answer,” he said. “We would like to see (Sarb and banks) working together to make certain we protect our clients.”
Shift towards proactive notification
Just last week, Sarb acknowledged there had been “a shift towards proactive notification and intervention, which has resulted in securing accounts prior to the dissipation of funds”.
This was revealed in the Sarb’s Bank Supervision Department annual report, which disclosed it was investigating 19 schemes in 2016.
It said it “remains concerned about the prevalence of illegal schemes in the country and the apparent willingness of individuals to participate in such ventures”.
“Members of the general public are again cautioned to exercise vigilance and prudence in their investment choices.
“Generally, illegal schemes are only reported by investors when they fail to receive their promised returns. This typically occurs when the funds have already been depleted and the scheme is on the brink of collapse. As such, the prospects of recovering funds for repayment to investors are limited.”
WATCH: Interview with Capitec CEO Gerrie Fourie
Graph: Inspections relating to illegal deposit-taking schemes
MMM files court papers over bank freeze
Deon Janse van Rensburg, a member of MMM-RSA, filed an application in the North Gauteng High Court in April against the commissioner of the National Consumer Commission, the commissioner of the SA Police Service and the National Prosecuting Authority, City Press reported on May 1.
He wants the court to declare that the MMM format is legitimate and does not have the characteristics of a Ponzi, pyramid, multiplication or chain-letter scheme.
In court papers, Janse van Rensburg said that “participants are having their bank accounts frozen on the basis that proceeds from a Ponzi scheme are receipted into these bank accounts”.
“These participants were left unable to meet their basic financial obligations as a result of their bank accounts having been frozen without any conclusive evidence that the money so received contravenes any act or regulations, but on the mere whiff of a media rumour.”
FULL CITY PRESS STORY: MMM fights Ponzi label
Hawks probe MMM
An investigation into whether MMM is breaching any laws in South Africa is a priority, the Directorate for Priority Crime Investigation (Hawks) said in April.
The Hawks said its probe into MMM moved from the cybercrime and digital forensic laboratory to the Commercial Crime Unit, following an initial review of the scheme by the NCC in 2015.
“The preliminary inquiry was opened following the NCC complaint and while the investigation is still at an early stage, we view this matter in a serious light,” Hawks spokesperson Brigadier Hangwani Mulaudzi explained.
It has been confirmed that MMM is not a member of the Financial Services Board or the National Stokvel Association.
FULL STORY: Hawks: Probe into MMM is a priority